As Deficit Mounts, Davis Tries To Spare Schools

Gov. Gray Davis proposed new taxes and cuts in a revised budget plan
for California last week that attempts to protect schools while
managing a deficit that has surpassed $23 billion.

He alleviated educators' concerns by refusing to suspend Proposition
98, the state's ballot measure that changed the constitution to
guarantee minimum funding for schools. The governor, a first-term
Democrat facing re-election this fall, instead wants to see a 2 percent
cost-of-living increase for K-12 schools, but he also said cuts to some
specific education programs would be needed.

Mr. Davis proposed several new revenue sources in a bid to find
enough money to try to patch the growing budget hole, which affects
both the current fiscal 2002 and upcoming fiscal 2003 budgets. Among
the proposals, the governor wants to raise taxes significantly on
motor-vehicle licenses and cigarettes, borrow from the state's future
tobacco-settlement funds, use such accounting maneuvers as delayed
payments to schools, and reduce state spending by $7.6 billion in
fiscal 2003. The total state budget approved for fiscal 2002 was $78.8
billion, with about $31.3 billion allotted to K-12 education.

"Education remains my top priority, and I'm pleased we were able to
provide the Proposition 98 requirements," Gov. Davis said in announcing
his proposal on May 14. "Even in the hardest times, we can't turn our
backs on the progress our children have made."

The state has already made deep cuts in its fiscal 2002 budget plan
to alleviate shortfalls.

The governor is allowed to suspend Proposition 98 in times of state
economic crisis, but chose instead to make deep cuts in other programs,
a spokeswoman for the governor said.

Gov. Davis received praise from education groups for what they
perceived as his willingness to fight for precollegiate education under
tough conditions.

"It is extraordinary that the governor is making the kind of effort
he is to protect the investments in public education," said Kevin
Gordon, the executive director of the California Association of School
Business Officials. "It takes a lot of guts to put forward a tax
increase when you are nearly six months away from Election Day, for the
sake of public schools."

The two main teachers' unions backed the plan. "We've been saying
all along that you can't make this deficit up in cuts," said Steve
Hopcraft, a spokesman for the California Federation of Teachers.

The budget proposal, however, would not be pain-free for the state's
6.7 million students and its nearly 1,000 school districts.

It would defer payment on new teacher-training programs and awards
to schools that performed well on state assessments; payments for last
year's winners would be postponed, and awards for this year would be
suspended.

It also would scale back funding for instructional materials, from
$625 million to $480 million; school library funding, from $100 million
to $80 million; and aid for reading textbooks, from $200 million to
$150 million. Moreover, the plan would eliminate a $75 million proposal
to purchase new science equipment in fiscal 2003.

But out-of-state tuition at the state's universities would increase
by 15 percent, and the University of California system would see $162
million in cuts, mainly to research programs.

The state's revenue shortfall has been growing since January, when
it was estimated at $12.5 billion for the coming 18 months.

California's problems started last year with the collapse of the
dot.com industry, and the state saw drops in capital-gains tax proceeds
from its wealthiest residents and businesses. As the national economy
went into recession, California's problems intensified. ("Revenue Shortfall Prompts Big
School Cuts in California," Feb. 6, 2002.)

Plan Questioned

Steve Smith, a policy analyst with the National Conference of State
Legislatures in Denver, said other states that are feeling the effects
of the ailing economy have been exploring increased taxes, such as the
cigarette tax.

"The magnitude is always going to seem enormous because it's
California," he added.

Gov. Davis said in his announcement that he felt confident that the
state's economy would improve later this year, although not
dramatically, and that the state would be able to repay the funds it
would borrow under his plan.

Republicans in the legislature are more skeptical. Sen. James L.
Brulte, the Senate's GOP leader, said that in January, the governor had
predicted the economy would improve by this month.

Sen. Brulte criticized the plan last week because he believes that
the tax proposals are unnecessary and that the state "does not have a
revenue issue, but a restraint issue," an aide said in reference to the
state's reluctance to put the brakes on spending.

Mr. Gordon meanwhile, predicted other state politicians would have
to follow Gov. Davis' lead or risk being seen as not caring about
education. "Once the governor stakes out his turf on Proposition 98,
the politician who has the temerity to disagree becomes the perceived
enemy of public education statewide," he said.

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